The Effect of Financial Risks on Financing Decisions of Saudi Commercial Banks - A Field Study on Commercial Banks Operating in Arar City

This study aims to analyze the effect of financial risks on the financing decisions of Saudi commercial banks in Arar City. The study explores the correlation between credit risk, liquidity risk, operational risk, and overall financial risk, as well as how these risks affect financing decisions, based on the survey administered among 50 participants from 3 different banks, which included junior and senior financial analysts, risk managers, and executives. The results show that every type of risk positively correlates with financing decisions. As these risks occur, elevate and become more prominent, banks use more sizable and riskier financing strategies to minimize possible negative impacts on their operations and preserve stability. This indicates that financial risks are interrelated and that robust risk management practices are essential to strategic financial management practices in the banking industry. However, it has some limitations, including the relatively small sample size and the cross-sectional study design, which may reduce the generalizability of the findings and limit the possibility of temporal causal inferences. Nevertheless, the study makes several contributions to the existing literature in terms of offering information about the relationship between financial risks and financing decisions of Saudi commercial banks with significant practical implications for bank managers and policymakers. Subsequent research employing increased data samples, longitudinal analysis, or a combination of both quantitative and qualitative studies may yield deeper insight into the interconnections above and strengthen risk management in the banking industry.